Real Estate THURSDAY, JULY 1, 2020 FROM COAST TO
COUNTRY
WWW.TWEEDVALLEYWEEKLY.NET.AU
Surge of home buyers expected following rate cut By Jonathon Howard THE REAL estate market is expected to heat up after the official cash rate was cut to a record low this week. The Reserve Bank of Australia (RBA) lowered the official interest rate from 0.25 per cent to 0.1 per cent at its November board meeting on Tuesday, November 2, and if the rate cut is passed on by the banks, buyer activity could increase. RBA Governor Philip Lowe said the economic outlook is more positive than three months ago, despite the lockdown in Victoria, but economic recovery is contingent on the ongoing containment of the virus. “At its meeting today, the Board decided on a package of further measures to support job creation and the recovery of the Australian economy from the pandemic,” RBA Governor Philip Lowe said. “With Australia facing a period of high unemployment, the Reserve Bank is committed to doing what it can to support the creation of jobs. “Encouragingly, the recent economic data have been a bit better than expected and the near-term outlook is better than it was three months ago.
“Even so, the recovery is still expected to be bumpy and drawn out and the outlook remains dependent on successful containment of the virus.” CoreLogic’s Head of Research Tim Lawless expects property prices to rise if the rate cut is passed on by the banks. “Historically, cuts to interest rates have fuelled housing market activity and generally aligned with upwards pressure on dwelling prices,” he said. “With the trend in housing values already rising around most areas of the country, there is a good chance lower rates could see momentum building across the nation’s most valuable asset class.” The Real Estate Institute of Australia (REIA) said the rate cut could improve housing affordability, which has already increased this year. REIA President Adrian Kelly said if the full 0.15 percentage point decrease was passed on by the banks, housing affordability - in the context of other factors remaining the same - would improve by 1.7 per cent. “The RBA is obviously throwing the kitchen sink at this pandemic and today’s decision will definitely benefit home buyers,” he said.
Open homes *All open homes are listed in NSW time
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More homebuyers could flock to the Tweed following this week’s interest rate cut
“For the June quarter of 2020, REIA’s Housing Affordability Report showed that housing affordability had already improved with the proportion of income required to meet loan repayments decreasing to 34.5 per cent, a decrease of 0.2 percentage points over the quarter. “Today’s interest rate cut, if passed on, would see the proportion of income required to meet loan repayments decreasing to 33.9 per cent.” An increase in consumer sentiment could also fuel a surge in the real estate market,
with the latest housing finance data showing an increase in the number of new home loans over the past four months. “Yesterday’s housing finance data showed that September recorded the fourth consecutive monthly increase and the highest level since October 2009 on the back of improving consumer sentiment about purchasing a home, particularly amongst first home buyers,” Mr Kelly said. “Today’s interest rate cut will add to buyer interest.” At the time of print, the only major bank to announce whether it would pass on the rate cut was
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the Commonwealth Bank, who has elected not to change its variable rate, but has cut its fixed rates to record lows, including an offer of 1.99% p.a. on new four year Fixed Rate home loans for Owner Occupiers paying Principal and Interest in the Wealth Package The RBA is expecting rates to stay low for the next three years and governor Phillip Lowe is encouraging everybody to ask their bank for a better deal. “And if they don’t give you a better deal after today’s decision, switch to a bank that will,” he said.
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